of Capital Budgeting 1. A firm should never accept a project if its acceptance would lead to an increase in the firm’s cost of capital (its WACC). a. True b. False ANSWER: False 2. Because “present value” refers to the value of cash flows that occur at different points in time‚ a series of present values of cash flows should not be summed to determine the value of a capital budgeting project. a. True b. False ANSWER: False 3. Assuming that their NPVs based on the firm’s cost of capital are
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FINANCIAL MANAGEMENT: CAPITAL BUDGETING MINI CASE 1 CAPITAL BUDGETING (MINI CASE) QUESTION A What is capital budgeting? Solution: Capital budgeting is a required managerial tool. One duty of a financial manager is to choose investments with satisfactory cash flows and rates of return. Therefore‚ a financial manager must be able to decide whether an investment is worth undertaking and be able to choose intelligently between two or more alternatives. To do this‚ a sound procedure to evaluate
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School of Management Blekinge Institute of Technology THE IMPORTANCE OF THE PAYBACK METHOD IN CAPITAL BUDGETING DECISION. By Alaba Femi‚ AWOMEWE & Oludele Olawale‚ OGUNDELE Supervisor: Anders Hederstierna Thesis for the Master’s degree in Business Administration Fall/Spring 2008 THE IMPORTANCE OF THE PAYBACK METHOD IN CAPITAL BUDGETING DECISION. By Alaba Femi‚ AWOMEWE & Oludele Olawale‚ OGUNDELE A thesis submitted in partial fulfillment of the requirements for the degree
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this report we focus on Nike’s Inc. Cost of Capital and its financial importance for the company and future investors. The management of Nike Inc. addresses issues both on top-line growth and operating performance. The company’s cost of capital is a critical element in such decisions and it is important to estimate precisely the weighted average cost of capital (WACC). In our analysis‚ we examine why WACC is important in decision making and we show how WACC for Nike Inc. is calculated correctly. Also
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Management of Working Capital James Ward Instructor: Leon Daniel BUS 650 Managerial Finance November 17‚ 2014 Management of Working Capital A financial metric that ensures operating liquidity of a firm‚ business organization or any other entity including governmental entities is known as working capital. Working capital is the difference between the current assets and liabilities of an organization determining the amount of debt acquired to finance its assets. George had also borrowed
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Q1 - In the film Divergent‚ a character I admire is Beatrice Prior or Tris. I admire her specifically because she is incredibly strong willed‚ brave‚ and dislikes showing weakness. This film is set in a futuristic Chicago‚ where the community is divided into 5 factions. Abnegation the selfless‚ Dauntless the brave‚ Eridute the intelligent‚ Condor the honest and Amity the peaceful. When all teenagers reach the age of 16‚ they are required to stay in the faction they were born into‚ or transfer to
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Nike‚ Inc Cost of Capital NorthPoint Large Cap Fund was considering whether to buy Nike’s stock or not. Nike was experiencing declines in sales growth‚ declines in profits and market share. However‚ Nike decided it would increase exposure in mid-price footwear and apparel lines‚ and it also commits to cut down expenses. The market responded with mixed signals to Nike’s changes. Kimi Ford‚ the portfolio manager at NorthPoint‚ did a cash flow estimation‚ and ask her assistant‚ Joanna Cohen to estimate
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Nike Inc.: Cost of Capital The Weighted Average Cost of Capital (WACC) is the overall required rate of return on a firm as a whole. It is important to calculate a firm’s cost of capital in order to determine the feasibility of a particular investment for a firm. I do not agree with Joanna Cohen’s WACC calculation. She calculated value of equity‚ value of debt‚ cost of equity‚ and cost of debt all incorrectly. For value of equity‚ Joanna simply used the number stated on the balance sheet instead
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Introduction Kimi Ford is a portfolio manager at NorthPoint Group‚ a mutual-fund management firm. She is evaluating Nike‚ Inc. (“Nike”) to potentially buy shares of their stock for the fund she manages‚ the NorthPoint Large-Cap Fund. This fund mostly invests in Fortune 500 companies‚ with an emphasis on value investing. This Fund has performed well over the last 18 months despite the decline in the stock market. Ford has done a significant amount of research through analysts’ reports
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TECH BUZZARD’s CAPITAL BUDGETING METHOD The type of capital budgeting preferred for Tech Buzzard is the Net Present Value method. The initial outlay of cash to get my firm started is low which makes the risk low. Tech Buzzard will start as a part time venture out of my home with very little of my own capital investment to lose. Never-the-less‚ I will use NPV as the primary analytical tool but I will also look that the IRR and Profitability Index for a more informed view of the payback period
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